Governance Quality and MFIs Repayment Performance

How is MFIs governance quality measured? What is the relationship between MFIs governance quality and repayment performance? This paper sheds light on these questions while using data from 250 African MFIs. While using linear multiple regression, we find first, that better governance can be measured by an aggregated index which encompasses a series of criteria based essentially on binary data. Indeed, this index aims to determine to what extent the observed units are managed on commercially viable bases. Second, we give the first evidence on the impact of the governance quality on the repayment performance. Our results show a negative link between the governance quality and the percentage of portfolio at risk (a proxy of the MFIs repayment performance) indicating that the governance quality improves the repayment performance within MFIs.